This invention relates to an automated auction system for trading products such as equity securities.
There are known auction processes. One type of auction process is a live auction used to trade antiques or paintings, for example. Other auctions include live auction processes for financial instruments such as, for example, futures contacts, and for equities in a stock exchange. Examples of live auction processes for stocks include the New York Stock Exchange® (NYSE) or the American Stock Exchange® (AMEX).
On the NYSE and AMEX, for example, orders to buy and sell generally are not executed with an automated process. Instead, a person called a “specialist” stands in front of a crowd, taking orders from the crowd and tries to match the orders with other participants in the crowd, his own account, or sends them to other market centers. While many of the tools a specialist uses to receive orders and record and report final trades are automated, the executions themselves, including the decisions and processes to execute, are overseen in a manual manner. This is in contrast to automated markets, such as the Nasdaq Stock Market, where executions often take place without human intervention. The Nasdaq Stock Market® is an example of an electronic negotiated market involving dealers that negotiate a trade for a security for their own account or for that of a client. Transaction recording and reporting in the NYSE and AMEX exchanges and The Nasdaq Stock Market are generally automated.
Other types of auctions are so called “call” or “periodic” auctions such as the Arizona Stock Exchange and the OptiMark™ trading system. In these types of auctions, orders are matched only at specified times during the day.